Selling tickets on online marketplaces like Ticketmaster has become an increasingly popular way for people to make extra money. However, many sellers wonder if they need to pay taxes on the income generated from these ticket sales. The short answer is yes, in most cases you will owe taxes on ticket resales through Ticketmaster or other sites.
Tax Requirements for Ticket Resales
The IRS considers income from selling tickets or any other items online as taxable income. This applies whether you are an individual making casual sales or a professional ticket broker. Here are some key things to know about paying taxes on Ticketmaster sales:
- You must report gross ticket sales as income on your tax return. This includes the full sale price of the ticket before any fees or costs are deducted.
- If you sell tickets at a profit, meaning the sales price is higher than what you originally paid for the tickets, this profit is considered a capital gain. Capital gains from ticket resales should be reported on Schedule D of your tax return.
- If you sell tickets at a loss, meaning the sales price is lower than the original purchase price, this loss can be claimed as a capital loss deduction. Capital losses can be used to offset capital gains.
- You can deduct any fees paid to Ticketmaster or other ticket marketplaces as business expenses. These will lower your taxable income from ticket sales.
- If ticket reselling amounts to a business for you, you may be required to pay self-employment tax on the income. You may also be able to make certain business deductions.
- You must keep records of your ticket sales and expenses in case of an audit. This includes documentation of original ticket costs.
So in short, the income you generate from reselling tickets is taxable just like any other income. You must properly report it on your tax return and keep records of sales activity and related costs.
How Ticketmaster Reports Sales to the IRS
You may be wondering how the IRS knows how much income you make from selling tickets online. Here is some information on how sites like Ticketmaster report sales activity:
- Ticketmaster itself does not issue 1099 tax forms to sellers. However, they do report sales activity to the IRS.
- For professional sellers who exceed 200 ticket sales transactions or $20,000 in gross sales per year, Ticketmaster will report this directly to the IRS on form 1099-K.
- For individual sellers under these thresholds, Ticketmaster still reports sales data in aggregate to the IRS. So your sales activity is still tracked even if you don’t receive a 1099-K.
- It is up to each seller to accurately calculate, report, and pay tax on their own ticket sales income, whether or not you receive a 1099-K from Ticketmaster.
The takeaway is that the IRS has access to data on Ticketmaster ticket sales, especially for high-volume sellers. So you cannot avoid claiming this income on your taxes, even if you do not receive a 1099 tax form.
How Much Tax You Pay
The specific tax rate you will pay on income from reselling tickets depends on multiple factors:
- Your ticket sale profits will be taxed at your normal income tax rate. This could range from 10% to 37% depending on your tax bracket.
- Capital gains from ticket resales may be taxed at 0%, 15% or 20% depending on your income level and how long you held the tickets before selling.
- You may owe 15.3% self-employment tax on your ticket income if this activity amounts to a business for you.
- State income tax will also apply to ticket sale profits in most states that have an income tax.
To get an accurate estimate, you will need to calculate your total income from ticket sales, deduct any eligible expenses, and then determine tax rates based on all your reportable income sources for the year.
Maximizing Tax Deductions
Since taxes can take a big bite out of your ticket resale profits, you will want to take advantage of any deductions you can to reduce your taxable income. Here are some potential deductions if you use Ticketmaster or other platforms to sell tickets:
- Ticket purchase costs – Deduct any amounts you paid to originally acquire the tickets for resale.
- Seller fees – Deduct Ticketmaster fees or fees paid to other ticket marketplaces.
- Payment processing fees – Deduct any credit card, PayPal, or other payment processing fees you incur.
- Advertising expenses – If you pay to advertise your ticket listings, these are deductible.
- Website fees – Any costs associated with maintaining a ticket resale website can reduce taxable income.
- Sales commissions – If you pay a commission to an agent or broker who helps sell your tickets, deduct this amount.
- Office supplies – Things like paper, ink, envelopes used in your ticket sales are deductible expenses.
Save all receipts and track costs closely. The more qualifying expenses you can deduct, the lower your taxable ticket sales income will be.
Using a Home Office Deduction
If you use part of your home exclusively for business activities related to reselling tickets, you may be able to claim the home office deduction. This allows you to deduct a portion of your housing expenses such as rent or mortgage interest, utilities, internet service, etc. The portion deductible is based on the square footage of space used for the business compared to your entire home.
To qualify, the space must be used regularly and exclusively for ticket reselling. Having a computer in your bedroom that you sometimes use to list tickets would not qualify. But a dedicated home office space used every day for the business could make you eligible for this sizable deduction.
How to Report Ticket Sales on Your Tax Return
Reporting income from ticket resales on your tax return is important to stay compliant with IRS rules. Here are some tips:
- Report gross ticket sale amounts as miscellaneous income on Schedule 1 of Form 1040. Don’t deduct fees or costs from the gross proceeds.
- Determine capital gains or losses from ticket sales and report on Schedule D. Gains also are included in total income on Form 1040.
- Use Schedule C to report ticket seller business income and expenses if this activity amounts to a business for you.
- Fill out Schedule SE to calculate self-employment tax, if applicable. The tax applies to 92.35% of your net ticket income.
- Itemize seller fees, advertising, supplies and other expenses on Schedule C or Schedule A if you don’t use Schedule C.
- Calculate state income taxes you owe on ticket profits and claim any credits for taxes paid to other states.
Consulting a tax professional can help ensure you properly account for all facets of your ticket resale activity and maximize deductions you are eligible for.
Using Professional Tax Preparation Services
Preparing taxes for income from ticket reselling can get complicated, especially if it amounts to a business for you. Working with a CPA or experienced tax preparer can help ensure you don’t overlook any important tax implications or deductions. Here are some key benefits of using a tax pro:
- They understand all the latest tax rules and forms related to online selling income.
- They can help you keep thorough documentation and receipts for all deductible ticket selling expenses.
- They can determine the most advantageous filing status for your situation.
- They can pinpoint tax credits and deductions you may miss on your own.
- They can advise you on estimated tax payment requirements to avoid underpayment penalties.
- They can represent you in case of an audit of your ticket sale income.
The fees for professional tax preparation and filing are deductible business expenses. Getting expert assistance can provide peace of mind and potentially yield significant tax savings that more than offset the costs.
Sales Tax Obligations
In addition to income tax on profits, you may need to collect and remit sales tax when you sell tickets online. Here is some important information about sales tax requirements:
- If you are a casual seller making occasional sales, you generally don’t have to collect sales tax.
- If you are a professional seller classified as a business, you likely need to register for a seller’s permit in any state where you make taxable sales and collect and remit that state’s sales tax on tickets sold to buyers in that state.
- Some states have lower sales tax thresholds before out-of-state businesses must register, collect, and remit sales tax to that state. These range from $100,000 to $500,000 in gross annual sales.
- Use online sales tax tools to help you easily calculate, collect, and submit sales taxes to each required state.
Failure to collect and submit required sales taxes can lead to penalties and interest charges. Consult a tax advisor to ensure you meet all your sales tax obligations.
Avoiding IRS Penalties and Interest Charges
It is important to accurately report all taxable ticket sale income to the IRS to avoid problems down the road. Here are some potential penalties to watch out for:
- Failure to file penalty – If you do not file a return by the due date, you may owe 5% of the unpaid taxes for each month or part of a month the return is late, up to 25%.
- Failure to pay penalty – If you do not pay taxes by the due date, you may owe 0.5% of the unpaid tax each month, up to 25%. The penalty applies even if you did file a return on time.
- Accuracy-related penalty – This can be 20% of any underpayment that results from negligence, disregard of rules, or substantial understatement of income.
- Interest – In addition to penalties, the IRS will charge compounded daily interest on any taxes owed until the balance is paid in full.
Taking steps to ensure timely, accurate filing and payment of all taxes due on ticket sale income is critical for avoiding expensive penalties and interest charges.
Conclusion
Reselling tickets can be a great way to earn extra income. However, you must make sure you comply with tax rules and properly report your income and expenses to the IRS. Keep detailed records of your ticket sales activity and costs. Seek help from a tax professional if you need assistance filing your return and maximizing deductions. With some planning, you can reduce your tax bill and keep more of the money you earn from your ticket resales.
